The Effect of Cosmetic Packaging on Consumer Perceptions A Senior Project presented to the Faculty of the Graphic Communication Department California Polytechnic State University, San Luis Obispo In Partial Fulfillment of the Requirements for the Degree Bachelor of Science by Sarah Aidnik March, 2013 © 2013 Sarah Aidnik Abstract: This project explores the relationship between cosmetic packaging, perceived price, quality, and retail environment. Packaging is often how consumers form their first impression of a product. Consumers can identify “high-end” and “low-end” cosmetics based on the items’ packaging using both conscious and subconscious cues. In a retail environment, this can signal a certain level of quality to a consumer. In addition to extensive research, a survey was conducted on a sample of 16 women over the age of 18 living in southern and central California who regularly use and purchase cosmetics and skincare from low-end and/or high-end retail environments to determine how different packaging affects consumer perceptions. Table of Contents i. Chapter One: Purpose of Study ................................................................................... 1 ii. Statement of the Problem............................................................................................ 1 iii. Significance of the Problem ...................................................................................... 2 iv. Interest in the Problem............................................................................................... 3 v. Chapter Two: Literature Review ................................................................................ 4 vi. "High-End" vs. "Low-End" ....................................................................................... 1 vii. Cosmetic Packaging.................................................................................................. 7 iix. Cues .......................................................................................................................... 9 ix. Chapter Three: Methodology ................................................................................... 11 x. Chapter Four: Results ................................................................................................ 13 xi. Discussion................................................................................................................ 23 xii. Chapter Five: Conclusions....................................................................................... 24 xiii. Recommedations for Future Research................................................................... 25 xiv. References................................................................................................................. 27 xv. Appendices................................................................................................................. 29 xvi. Survey .................................................................................................................... 29 xvii. Survey Images ...................................................................................................... 30 xviii. Survey Results ..................................................................................................... 38 Chapter One Purpose of Study Statement of the Problem In our modern society, packaging and advertising are huge markets that continue to grow. In cosmetics, many companies rely on packaging and advertising to draw in buyers. Unless a consumer has previously used a product, the packaging will be a significant part of their decision to purchase a product. Customers form an opinion about the product based on its overall appearance before looking at the ingredients or the price tag. Product packaging acts as an advertisement and as an extension of the product itself. During an interview, Jeanine Lobell, CEO of Stila Cosmetics, she stated, “I believe that a beautiful package sets up expectation for a great product,” (Bryan, “Designer Interview: Jeanine Lobell”). Consumers expect nice packaging from an expensive (and presumably, high quality) product. “In beauty, the experience at point-of-sale (POS) remains the most important,” (Armoudom and Ben-Shabat, “Beauty: Only as Deep as the Customer Experience). Conversely, a consumer may interpret a product as being more high quality and luxurious than it actually is because its packaging. In addition to packaging of a cosmetic product, the retail environment may also play a significant role in the buying behaviors of consumers. Consumers expect high quality products to be sold at high-end retailers and cheaper products to be sold at lower-end retailers. They expect 1 to pay certain prices at certain retail environments and this may influence their interpretation of quality and price of products. Therefore, I intend to study the effect that cosmetic packaging has on consumer buying behavior, specifically when analyzed within two separate environments: low-end retailers and high-end retailers. Significance of the Problem The cosmetics industry is worth more than 50 billion dollars. The cosmetics market in the United States ended 2011 with “a total revenue of about 53.7 billion U.S. dollars,” (Schulz, “Statistics and Facts on the Cosmetics Industry”). It is paramount for companies to maximize their marketing strategy and effectively target their desired consumer. This is especially important in cosmetics, as the industry is dominated by several large companies that market multiple brands on different levels. Though many of their respective products are relatively similar, all of these product lines must be packaged and advertised differently to reflect the setting at which they are sold. Companies assume that they should be making packaging look as high quality as possible, however that isn’t necessarily true for all consumers. Packaging should be appropriate for the environment in which the product will be sold. Products may be passed over for either extreme; packaging looking “too nice”, leading to the perception that the product is too expensive or the consumers will be paying for the packaging itself, or packaging looking “too cheap”, leading consumers to view the product as low quality. While there may or may not be a significant physical difference in the chemical makeup of high-end versus low-end cosmetics, the perception of a difference in quality and price 2 based on packaging is real. “You may have a very expensive cream sold in a very high- end department store in very expensive packaging and another cream sold in the mass market drugstore chain, which might be as good and contain the same ingredients and cost one tenth the price,” (Chura, 2006). Moreover, when taking the retail environment into consideration, the look of the packaging must match the setting in which it is sold in. An expensive product with premium packaging is going to look out of place in a lower-end retail environment, and thus may not sell. Similarly, a product with very basic and cheap packaging is not going to sell in a high-end retail environment. Interest in the Problem I have a personal interest in the cosmetics industry as a regular consumer for a number of years. I find it fascinating that women, including myself, spend so much money on nonessential goods and often make decisions to purchase products based on looks. Two products can effectively serve the same purpose, yet one can cost many times more and still sell. Much of the difference between products is their packaging. I am interested in the conscious decisions women make about cosmetics based on their packaging as well as the subconscious, psychological reasons behind purchases. 3 Chapter Two Literature Review “High-End” vs. “Low-End” Prior to reviewing different styles of cosmetics packaging, it is important to review and define different levels of cosmetics. For the purpose of this study, cosmetics will be divided into two categories: low-end and high-end. What separates low-end cosmetics from high-end cosmetics is the overall experience associated with the product. “Experience” is an all-encompassing idea: it includes the store purchasing experience, the experience of opening the product and experiencing the packaging, the experience of using the product, and enjoying its aesthetic appeal. Retail environments where low-end cosmetics and skincare are sold include drugstores, grocery stores, and discount stores including stores such as CVS, Rite-Aid, Walgreens, Walmart, Target, etc. Retail environments where high-end cosmetics and skincare are sold include department stores, cosmetics specialty stores, and brand specific stores, such as Nordstrom, Macy’s, Sephora, Ulta, MAC, etc. Recently, however, some retailers have attempted to bridge the gap between low-end and high-end. Retailers such as Target, Walmart, and CVS have incorporated higher end brands into select locations alongside the lower-end cosmetics. Heidi Hubert, a package engineer who has worked with numerous cosmetics companies stated that CVS’s “Beauty 360” is a good example of this. Beauty 360 was “was an attempt by CVS to cater to a more upscale clientele, with high-end cosmetics priced from about $15 to $170,” (Reuters, “CVS Shutting Down 4 Experimental Beauty 360 Stores”). CVS created additions to their existing drugstores that mimicked higher-end cosmetic stores. However, the strategy was unsuccessful and CVS decided to terminate Beauty 360 in 2012. This highlights the clear definition between “low-end” and “high-end”. “Drugstores